20 Jan 2017

New York Workers’ Compensation: The Year in Review 2016

By Ronald E. Weiss, Esq. and Ronald Balter, Esq.

The year 2016 started with some expectation of substantial “reform” being enacted in the Workers’ Compensation Law. As part of his executive budget, Governor Cuomo proposed some of the most extensive substantive and procedural changes to the Workers’ Compensation Law since the 2007 Workers’ Compensation Reform Bill. Labor and the bar opposed almost all provisions of the legislation from the start. Labor particularly opposed the provision which would have eliminated mandatory deposits of the present value of indemnity liability of permanent partial disability cases into the Aggregate Trust Fund (“ATF”). The mandatory ATF deposit had been the impetus for much higher settlements of permanent partial disability cases since it was imposed in 2007. After an analysis by the New York Compensation Insurance Rating Board concluded that the Governor’s budget bill would not cut costs, the business community backed off its initial support of the bill. The Workers’ Compensation reform proposal was then for the most part stripped out of the budget bill that was passed by the Legislature in March of this year.

The Legislature did enact the New York State Paid Family Leave Act into the Disability Benefits Law, effective January 1, 2018. To be funded by payroll deductions, the Paid Family Leave program is to be administered by disability carriers or employers self-insured for disability. Enforcement will be under the jurisdiction of the Workers’ Compensation Board. The Paid Family Leave Act is discussed in a new section in Chapter 14 of this year’s Handbook.

(Publisher's Note: The 2017 Edition of the NY Workers' Comp Handbook goes on sale in early April.)

In addition to rejection of abolition of the requirement for mandatory payments into the ATF, among the Governor’s proposals that did not pass were procedural changes which have radically changed the hearing and appeals process for workers’ compensation claims. These included the transfer of cases to any Workers’ Compensation Law Judge (“WCLJ”) at any time, reduction of the size of the Workers’ Compensation Board from the 13 to 7 Commissioners, authorization for Workers’ Compensation Board employees who are not Commissioners or a single Commissioner to decide Applications for Board Review and imposition of additional penalties for unsuccessful appeals. The rejected proposal included changing the manner in which the average weekly wage is calculated under N.Y. Work. Comp. Law § 14. Also the Board would have been empowered to impose bulk penalties on employers and carriers not meeting arbitrary performance standards set by the Board’s Payor Monitoring and Compliance Program. The Governor’s proposal would have greatly expanded the range and authority of non-physician health care providers to not only render treatment but also render opinions on compensability on which the Board could rely. Which, if any, of these proposals may be revived in this year’s legislative session remains to be seen.

Meanwhile, 2016 saw increases in the maximum compensation rate and workers’ compensation insurance premiums. As a result of the 2007 reform legislation’s annual indexing of the maximum compensation rate to the state average weekly wage, the maximum indemnity rate was raised to $864.32, effective July 1, 2016. The Department of Financial Services approved an average increase of 9.3% in workers’ compensation loss costs for new or renewals of workers’ compensation insurance policies, effective October 1, 2016. The New York Workers’ Compensation Insurance Rating Board attributed the bulk of the increase to the closure of the Fund for Reopened Cases under N.Y Work. Comp. Law § 25-a as of January 1, 2014. This resulted in insurance carriers maintaining liability for many reopened claims which would have been transferred to the Special Fund for Reopened Cases. As reviewed below, however, the Appellate Division, First Department, has held that the closure of the Fund to new claims violated the Contract and Takings Clauses of the United States Constitution. As of this writing, that decision is on appeal to New York’s highest court.

New Commissioners

In June 2016, Governor Cuomo appointed six new commissioners to the Workers’ Compensation Board replacing a few commissioners whose terms had expired and filling vacancies. The Governor also reappointed three current Board members to new terms. This marks the first time in a number of years that the Board will be fully staffed with 13 commissioners. Backgrounds of the new commissioners are evenly split between labor and employer orientations. The Governor also named former Board Vice-Chair, Kenneth J. Munnelly, as Chair of the Board. Mr. Munnelly had previously served as Board General Counsel. Current Board member, Freida Foster, was named Vice-Chair. It remains to be seen what effect this newly staffed Board will have on adjudication and policy.

Administrative and Regulatory Changes

The Board has been very active in making changes in administrative practice either through changes to its regulations or Board pronouncements otherwise known as Board Subject Numbers. Many of the changes are designed to reduce the number of hearings and appeals and tighten Board control over the adjudication process. All of these changes are discussed in detail in various chapters of this year’s Edition.

Effective October 3, 2016, the Board adopted extensive changes to rules governing Applications for Board Review. The new rules codify prior Board decisions which held carriers and employers no longer permitted to stay payment of awards on appeal upon filing of an Application for Mandatory Full Board Review. For briefs in support of Applications for Review and Rebuttals, the rules impose strict formatting and page limitations to no more than eight pages unless the appellant or respondent specifies in writing why the legal argument could not be made within the eight page limit in which case the brief can be no longer than 15 pages. The new rules provide the Board many technical bases for rejecting Applications not compliant with proper format or properly filed, including the attachment of documents already contained in the Board’s Electronic Case File.

The Board also amended its rules to establish a process of Voluntary Binding Review whereby parties may agree in applications involving indemnity only issues to be subject to a kind of binding arbitration resulting in a § 32 settlement agreement on the issue brought for appeal. The new process is not expected to see a great deal of use but is an option for parties not able to settle their differences who may wish to obtain a speedier resolution of an appeal than by decision of a Board Panel. New rules affecting appeals are discussed in Chapter 12 of this Edition.

In February 2016, the Board announced that it would use a desk review process for approval of § 32 Waiver Agreements in certain cases. The Board mandated that cases in which the claimant is represented by counsel which settle indemnity only the desk review process for approval be used with no right to a hearing. However, the Board still schedules some indemnity only § 32 cases for hearings. Parties in cases where the claimant is represented have the option to consent to have the Board conduct desk review and approval of any other § 32 settlement agreement, including full and final settlements of medical and indemnity. All settlements involving claimants not represented by counsel must continue to be approved through the hearing process. The Board also promulgated new forms with very detailed provisions to be used for § 32 Settlements and is requiring claimants to affirm that they watched a Board video regarding settlement of a workers’ compensation claim as a condition precedent to settlement approval. The changes were obviously aimed at taking as many § 32 Settlements out of the hearing process as possible and, according to the Board, lessening time for approval of settlements. These changes are discussed in Chapter 13 of this year’s Edition.

Meanwhile, the Board amended its rule regarding stipulations in November 2016 to permit parties in cases in which the claimant is represented to approve stipulations without the parties appearing for a hearing before a Workers’ Compensation Law Judge (“WCLJ”). Stipulations involving unrepresented claimants still must be approved through the hearing process. Stipulations approved at hearings however no longer need to be reduced to a writing other than the resulting decision of the WCLJ. This change in practice regarding stipulations has led a number of districts of the Board to cancel what used to known as WISK calendars. See Ch. 13, § 13.02 for further details on the stipulation process.

The Board has also effected change in responsibilities as between the Special Funds Conservation Committee (“SFCC”) and the Board itself. As of October 1, 2016, all requests for reimbursement from the Special Disability Fund must be submitted to the Board rather than SFCC and utilize revised and consolidated biannual reimbursement request forms. Effective July 25, 2016, SFCC was relieved of authority for extending settlement authority in cases in which Special Disability Fund liability under N.Y. Work. Comp. Law §§ 15(8) and 14(6) have been established. The Board’s Waiver Agreement Management Office (“WAMO”) now has this authority. Any settlement agreement not approved by the Board by December 30, 2016 would need to be resubmitted to WAMO for de novo review.

Limitation on Opioid Use

A new section in this year’s edition highlights legislative and Board efforts designed to deal with the growing problem of opioid abuse. In 2016, the Legislature restricted initial opioid prescriptions to seven day supplies down from the 30 days previously allowed although renewals continue to be permitted for up to 30 days. Meanwhile, the Workers’ Compensation Board has proposed creation of a Pharmacy Benefits Plan expected to include a prescription drug formulary, limitations on compounded medications and greater compliance with the Medical Treatment Guidelines. The Board also announced a new hearing process for consideration of opioid weaning which allows the insurer to request a hearing to specifically consider whether the claimant should be weaned from opioids upon submission of an IME report that indicates weaning is appropriate and recommends a weaning program. Thereafter the new opioid hearing process is designed to expedite adjudication on weaning and places the burden on the prescribing physician to promptly submit contrary medical if he or she does not agree with the prescribed weaning program. See Chapter 6 of this year’s Edition.

Case Law Developments and Case Summaries

Ninety-six new decisions of the Appellate Division and the Court of Appeals on workers’ compensation topics are summarized and analyzed in Part II of this year’s edition of the Handbook. A number of these decisions broke new ground and can be expected to have a significant impact on workers’ compensation practice going forward.

Reopened Case Fund Under WCL § 25-a:

In a decision that may potentially have the greatest impact on liability for workers’ compensation, the Appellate Division, First Department, ruled in American Economy Insurance Company v. State of New York, 139 A.D.3d 138, 31 N.Y.S.3d 456 (1st Dept. 2016), that the closure of the Special Fund for Reopened Cases to new claims as of January 1, 2014 constituted an unconstitutional impairment of existing contractual relations and retroactive regulatory taking in violation of the Contract and Takings Clauses of the United States Constitution. The ruling in effect served to “reopen” the Reopened Claim Fund to qualifying new claims. The Board has appealed the Appellate Division’s ruling to the Court of Appeal, effecting a stay regarding action on new claims for § 25-a relief. Decision by the Court of Appeals is expected in 2017. See Part II, § 50.43[2]; Part I, Ch. 2, § 2.18[2].

Wage Earning Capacity:

The Appellate Division, Third Department, ruled in three decisions that the Board can consider non-medical, vocational factors in determining the weekly rate of compensation for permanently partially disabled claimants. Previously the Appellate Division seemed to have held that vocational factors were relevant only with respect to duration of benefits for permanently partially disabled claimants. The Court reaffirmed that vocational factors do not enter into determination of the rate for a temporary partial disability which is based solely on evidence of medical impairment. See Rosales v. Eugene J. Felice Landscaping, __ A.D.3d __ , __ N.Y.S.3d __, 2016 Slip Op. 07239 (3d Dept. 2016); Sarbo v. Tri-Valley Plumbing & Heating, __ A.D.3d __, 39 N.Y.S.3d 846, 2016 Slip Op. 07243 (3d Dept. 2016) and Till v. Apex Rehabilitation, __ A.D. 3d __, __ N.Y.S.3d __, 2016 Slip Op. 07247 (3d Dept. 2016). See Part II, § 50.20[1]; Part I, Ch. 5, § 5.31[2].

Concurrent Awards:

In Colasanti v. Consolidated Edison, 142 A.D.3d 1276, 37 N.Y.S.3d 925 (3d Dept. 2016) and Walcyzk v. Lewis Tree Service, Inc., 134 A.D.3d 1364, 22 N.Y.S.3d 257 (3d Dept. 2015), the Court held that a lump sum payment of a schedule loss of use award under N.Y. Work. Comp. Law § 25(1)(b) while the claimant is receiving ongoing benefits for a permanent partial disability on another case does not violate the restriction against concurrent payments exceeding the maximum compensation rate. See Part II, § 50.22; Part I, Ch. 5, § 5.53[2].

Carrier Credit on Third Party Settlement:

In Terranova v. Lehr Construction Co., 139 A.D.3d 1309, 31 N.Y.S.3d 692 (3d Dept. 2016), the Appellate Division allowed the carrier to take a full credit on a schedule loss of use balance awarded after settlement of the claimant’s third party action without any further contribution to litigation costs for use of their credit. In effect the Court held that carriers are not obligated to make additional payments for litigation costs over and above the amount by which they reduced recovery on their workers’ compensation lien. Many submit that this is contrary to the dictates of the Court of Appeals decisions in Kelly v. State Insurance Fund, 60 N.Y.2d 131 (1983) and Burns v. Varriale, 9 N.Y.3d 207 (2007). The claimant has been granted leave to appeal to the Court of Appeals. Decision by the Court can be expected sometime in 2017 and will determine whether this exception of the rule for payment of apportioned litigation costs will stand. See Part II, § 50.60[3]; Part I, Ch. 7, § 7.01[8].

Exclusive Remedy:

In Diegelman v. City of Buffalo, __ N.Y.3d __ , __ N.Y.S.3d __, 2016 Slip Op. 07817 (2016). The Court of Appeals held that a police officer may sue in tort a municipality which covers the employee for wage loss and medical benefits under N.Y. Gen. Mun. Law § 207-c, but has elected not to provide workers’ compensation coverage for its work force. There is no exclusive remedy protection under N.Y. Gen. Mun. Law § 207-c or § 207-a. See Part II, § 50.62; Part I, Ch. 14, § 14.05[1].

Consent to Third Party Settlement:

In Ace Fire Underwriters Insurance Co. v. Special Funds Conservation Committee, __ N.Y.3d __ , __ N.Y.S.3d __, 2016 N.Y. Slip Op. 07833 (2016), the Court of Appeals held the carrier must get Special Funds’ consent to a third party action settlement in which the Special Disability Fund has been held liable under N.Y. Work. Comp. Law § 15(8), but if the carrier failed to do so it can cure the defect by moving for an order nunc pro tunc to approve the settlement. See Part II, § 50.60[2]; Part I, Ch. 7, § 7.01[5].